Economic & Housing Outlook

Transcription

1 Economic & Housing Outlook By Lawrence Yun, Ph.D. Chief Economist, National Association of REALTORS Presentation at Northern Arizona Association of REALTORS November 30, 2017

2 Tax Reform Mortgage interest deduction? Property tax deduction? Personal Exemption? 1031 Exchange? Not the Same as 1986 Reform removed passive losses for non real estate professional

3 Taxable Income after Deductions (Figures are for illustrative purpose only) Taxable Income with Same Standard Deduction Taxable Income with Higher Standard Deduction Exemption Taxable Real Estate Deductions Exemption Taxable Real Estate Deductions

4 Pending Sales Index Losing a Step (Quarterly Seasonally Adjusted) Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 Source: NAR

5 Flagstaff Housing Statistics Home Sales Sold up 5% in third quarter Median Price up 8%

6 Existing Home Sales + Forecast 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,

7 Existing Home Sales Mostly Rising in Recent Years (Exceptions: when home buyer tax credit ended and taper tantrum ) 6,000,000 5,500,000 5,000,000??? 4,500,000 4,000,000 3,500,000 3,000,

8 Jan Apr Jul Oct Jan Apr Mortgage Rates 30-year Fixed Rate Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul

9 10 Existing Home Sales Rising After Election (% change from one year ago) Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

10 New Home Sales Rising After Election Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct -20

11 50 NAR HOME Survey of Consumers % Strongly indicating Good Time to Buy Q Q Q Q Q Q Q3

12 Stock Market: S&P 500 Index

13 Animal Spirit Revival of Consumers? Jan Consumer Confidence Index Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

14 Animal Spirit Revival of Businesses? Small Business Optimism Index Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

15 National Median Home Price $280,000 $260,000 $240,000 $220,000 $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 Source: NAR Jan Nov Sep Jul May Mar Jan Nov Sep Jul May Mar Jan Nov Sep Jul May Mar Jan Nov Sep Jul May Mar Jan Nov Sep Jul

16 Home Price Index (Constant Quality) Flagstaff Metro Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1

17 Income Growth and Home Price Growth (from lows in 2011 to 2017) 60% 50% 48% 40% 30% 20% 15% 10% 0% Income Home Price

18 30% 20% Difficulty Saving for Downpayment 25% 26% 25% 23% 20% 16% 17% 17% 10% 5% 5% 7% 7% 7% 7% 6% 7% 0% First-time Buyers Repeat Buyers Profile of Home Buyers and Sellers

19 Months Supply of Inventory Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Source: NAR

20 12 Actual Tenure in Home is Elevated Profile of Home Buyers and Sellers

21 Single-family Housing Starts Thousand units Well Below 50-year Average Oct Feb Jun Oct Feb Jun Oct Feb Jun Oct Feb Jun Oct Feb Jun Oct Feb Jun Oct Feb Jun Oct Feb Jun Oct Feb Jun

22 Flagstaff Metro Single-Family Permits

23 Homeownership Rate Still Near 50-year Lows Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1

24 90 Is Owning still American Dream? Will you Buy in Future? Yes on Dream Yes on Future

25 Student Loan Debt Impacted Purchase a home Take a vacation Purchase a car Continue with education Rent solo or change living situation Purchase entertainment Purchase clothes Start a small business Purchase daily necessities Rent or own closer to work or school location Own a pet None of these 5% 21% 46% 40% 40% 38% 33% 76% 72% 65% 64% 58% % 20% 40% 60% 80%

26 Wealth: From 2000 to 2016 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Renters Homeowners

27 Fewer Borrowers Defaulting in Arizona (Serious Delinquency Rate) All Mortgages Veterans Affairs Mortgages FHA Mortgages Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3

28 FHA Insurance Premium - High

29 1.4 Tightening Monetary Policy Fed Funds Rate Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep

30 Bubbles Everywhere?

31 Bubbles Everywhere? Cyclically Adjusted P/E Ratio Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Commodities/Oil? Gold? Stock Prices? Bonds? Commercial Real Estate? Residential Real Estate? Real Estate Abroad? Bitcoin?

32 U.S. Residential No Bubble Nationwide Home Sales (in millions) Single-family Housing Starts (in millions) % Lower % Lower Bubble Today Bubble Today

33 Jan Feb Mar Home Price Appreciations (Case-Shiller Constant Quality Index) Apr May - Jun Seattle Celebration Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May - Jun Jul Aug

34 Who will get Amazon HQ2? Washington DC, Boston, Raleigh-Durham, Dallas, Nashville, Atlanta What was San Jose like before becoming Silicon Valley? Other Company Expansions Charleston, Mobile, Savannah? No Matter Direct winners will be $100,000 salary workers Indirect winners will be property owners Indirect losers will be renters For all Massive traffic jam Slow Moving Real Estate Prices compared to Stock/Bond Prices

35 6 GDP Growth Rate 3% in Q2 and Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q

36 Residential Real Estate Investment Growth Rate Negative in Q2 and Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q

37 150, ,000 In thousands Jobs (8 million lost 16 million gained) 140, , , , , Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

38 Total Jobs in Flagstaff Metro (14% growth vs 11% nationwide from 2000) 70 In thousands Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul

39 Total Job Openings In thousands Jan Sep May Jan Sep May Jan Sep May Jan Sep May Jan Sep May Jan Sep May Jan Sep May Jan Sep May Jan

40 In thousands Weekly Initial Unemployment Insurance Filings Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May

41 Economic Forecast Forecast 2018 Forecast GDP Growth 2.9% 1.5% 2.2% 2.8% Job Growth +2.6 million +2.0 million +1.8 million +2.4 million CPI Inflation 0.3% 1.3% 2.0% 2.5%

42 Housing Forecast Forecast 2018 Forecast New Home Sales Existing Home Sales Median Price Growth 500, , , , million 5.4 million 5.5 million 5.7 million + 6.8% +5.1% +6.0% +5.0% 30-year Rate 3.9% 3.6% 4.0% 4.5%

43 Actual versus projected Households KC Federal Reserve estimate of 6.9 million missing households

44 Young Adults Living with Parents % of those aged 25 to

45 Trump Presidency o Flood Insurance Availability? Extended Thank You for Responding o Dodd-Frank? o CFPB Consumer Protection? o Fannie/Freddie and Mortgage Availability? o Tax Reform?

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